Reputation Management: the need to take a broader view

Much has been written about reputation management and its importance to individuals and organisations. Having recently conducted a literature review we were struck by the sheer quantity and variety of publications, ranging from the banal and obvious to the extremely useful and insightful.

Our principal observation was that as a concept, reputation management is viewed far too narrowly and there is not enough reference to the deeper elements that are equally essential to its understanding. Terms frequently associated with reputation management include: risk and issue management, crisis management, external communications, brand management, customer relationship management, stakeholder engagement, shareholder value and CSR. There is nothing wrong in the use of these terms, they are fundamental, but it is not the full picture.

Crisis prevention and returning an organisation to recovery following a crisis features heavily within many publications. Once again, perfectly legitimate concerns, but the danger is psychological, insofar as once you have well-developed pre-crisis and crisis plans, there is a tendency to relax in the opinion that such actions and preparations are like a vaccine. Immunity, however, has its limits and threats like viruses mutate, creating new vulnerabilities and risks, some of which have not been experienced before.

Rather like leadership, reputation is a term that we all intuitively understand but find hard to pin down and determine what it is and what it is clearly not – scope is an issue. Interpreting it too narrowly risks over simplification too broadly risks loss of meaning and may include elements that are not relevant to the concept.

It is our experience that executives tend to take a surface view of reputation management, a view that is increasingly dominated by online reputation management and the handling of negative comments or the crafting of positive reviews and opinions. This is a perfectly

legitimate part of the construct, but by only focusing on these surface elements it negates a proper exploration of the underlining root causes of reputational risks.

Reputation management needs the equivalent of preventative medicine. Just as some people may have a genetic predisposition within a risk environment, many firms, by the nature of their operations, have a predisposition for risks, and just like in preventative medicine, different levels of intervention are required to mitigate exposure. Ideally, this is the purpose of good

governance and compliance, but these approaches are rules-based and do not take into account how people may react emotionally to situations, which is a critical part of reputation and its interpretation.

Those businesses that engage in efficiency and financial ratio calculations ignore the emotional hurt and perceived injustice that customers can experience from time to time. Equally, the private equity, target-driven approach may be efficient, but fails to understand or address

the human element of any business and the emotional factors that drive both employees and customers. Upsetting customers through small efficiency savings is not actually that clever if it is done in a manner that alienates people. With private equity, people become reduced to targets and numbers, ignoring the complex cocktail of emotions that moderate peoples’

behaviour, all of which can alienate the very people who generate and create the wealth in the first place.

In a similar vein, in 2009, Jack Welsh stated in an FT interview that “...shareholder value is the dumbest idea in the world”. He conceded in the interview that shareholder value was an outcome, not a strategy, and any organisation’s main constituents were its employees, customers and products. One of the most positive outcomes of our interest in reputation and its management was that people have been put back into the equation, their rights and interests were recognised.

Within a commercial context, emphasis has been on reactive elements and not enough on the pro-active elements or indeed, many of the emerging geopolitical issues and how these may impact on brands in the future. Yes, risk management and business continuity management are very well developed in advanced countries as compared to developing countries. But reputation is more than just having an up-to-date risk register or conducting a business impact analysis report. Equally, it is more than just shareholder value, target setting or the focus on profitability. It is only through understanding what factors create and sustain brand equity in the first instance that we can understand what makes it grow.

What is Reputation Management?

The term reputation management is a bit of a misnomer as one cannot really manage reputation per se as it is essentially an outcome. Numerous definitions exist but most centre on reputation (in a commercial context) being an aggregate evaluation of stakeholders’ opinions – in essence a form of assessment about an organisation’s past, current behaviour and future prospects.

Reputation exists outside of the organisation or individual and normally takes time to accumulate. Most professionals involved in protecting and promoting business understand that reputation is ultimately about delivering on brand promises and consistency in terms of values and ethics. It is also very much about the bottom line, as a good reputation correlates with superior financial performance and the building of brand equity and shareholder value.

Clear behavioural change and actions are fundamental to good reputation

– not simply strong public relations or perception management. It is important that organisations act and be held accountable through their actions, rather than just declarations of intent. The need for action and transparency has been catalysed by user-generated content, which is a blessing and a curse.

A curse because vindictive customers can easily damage the good reputation

of a business, but a blessing because people need to know others’ experience with it. Google, of course, argue that this issue is moderated by the balance of good and poor reviews, but it nonetheless highlights why reacting to a complaint and preventing it from recurring is worthwhile in terms of brand equity.

The term resilience organisation has become popular within business literature, and rightly so. It is used in the PAS 200 crisis management

document and is linked to reputation via a strong sense of situational awareness and flexibility. Building a resilient organisation is, therefore, a function of reputation management - which is why narrowing the conceptual scope of reputation is dangerous as it fails to address what actually makes a company resilient in the first place; resilience can only be achieved if the aetiology of reputational risks is properly identified and addressed.

From experience, we have realised that the origin of most reputational risk arises from within the organisation, from a number of common reasons, such as:

• Poor management decision-making

• Failure to address problems and bad behaviour

• Focus on financial targets and shareholder return without enough attention and

• care of the factors that help generate these in the first place

• Not acting upon weak signals or valid criticism from stakeholders

• Poor organisational values and culture

• Lack of control of risk appetite, risk exposure and capacity

• Failure of leadership and senior management to adjust corporate behaviour

In a less deterministic, more stochastic environment, in which uncertainty is increasing, having some form of way of anticipating discontinuities and disrupters is extremely valuable. The future prospects of a business are now more important than ever because there are so many risks that can significantly disrupt it - one can no longer assume that a business will be around in a few years’ time.

Organisations that can communicate and persuade stakeholders that they are resilient and “fit for purpose” and can innovate are more likely to survive. As soon as a perceived weakness is recognised in a business model or in its products/services, the business can rapidly go into a cycle of decline. This is why strategic anticipation and innovation are so crucial now

to reputation. Strategic anticipation of plausible threats and the generation of options for examination (scenarios) are now critical elements of reputation management.

Simple, basic mistakes are not corrected

Take for example, a large taxi company that picks someone up from London Heathrow and brings them to their home and charges £4.00 for parking at the airport even though they were only in the car park for 5 minutes as the passenger was already through security and waiting. The driver, either because of a mistake, or knowingly, over-charges the passenger as the original quoted fee absorbs the parking fee. The passenger does not argue, pays the driver, and then telephones the company.

First he is bamboozled by a series of terms and conditions, most of which are not relevant to the situation. After several frustrating minutes, he is put through to a manager who does not really understand the rules, self-evidently. This manager then agrees to get a more experienced manager to telephone the passenger back, which duly happens and the experienced manager explains that a mistake has occurred and that the driver was in the wrong.

Why, because he just joined the company and is still a little lost and he will be spoken to! The passenger is not especially bothered by the pecuniary loss of £4.00 – that is not the issue – he is more annoyed at the asymmetry of the situation had he failed to pay the taxi driver the full fare he might have been arrested or barred from using their services. He expects, in principle, some form of compensation in terms of £4.00 off his next fare or something.

He gets nothing but sorry so he goes over to Uber and the major competitor has lost potentially hundreds if not thousands of pounds of business. This typifies the response to customers in the UK today. Of course, customers try it on all the time and there are professional complainers and mean-spirited abusers. But a genuine error or a clear case in which a company is wrong is surely a reputation risk opportunity to cement a disgruntled customer into lifetime fan and advocate, one that will sing your authentic praises. This simple example highlights why some many companies lose customers to competitors.



The Reputation Tree

The use of a tree as an analogy for how reputation can be managed is useful. Classic reputation management tends to focus on the elements above ground, the trunk, the branches, the leaves and, above all, nurturing and protecting the fruit. Attention, however, should be also on the “roots” as these are often a better way to keep an organisation (or a tree for that matter!) healthier in the long term. Reputational capabilities are very evident for “branch” elements, but most businesses have under-developed reputational capabilities for “root” elements. This is where more effort and skills development must be focused, including strategic anticipation.

Above Ground (Branch) Elements

• Values, ethics, good corporate governance

• Growth, targets and financial performance

• Performance within risk relevant indices

• Regulatory compliance

• Proactive - historic and current risk /issues management/business continuity management

• Reactive - crisis management, including online reputation management

• Brand communications - message control, CSR communications

• Website and engagement channels, including social media channels

• Customer engagement

• Customer experience

• Managing organisational profile (media and corporate comms.)

• Monitoring and listening to feedback through social media

• Use of real-time analytics

Below Ground (Root) Elements

• Identifying root causes of problems, risks and issues

• Emerging issue and trend analysis

• Assurance and audit

• Strategic anticipation - issues, forecasting and scenario planning

• Developing distinctive capabilities and products/services (preventing commoditization)

• Analysis of failures

• Analysis of customer and wider stakeholder complaints

• Brand management - communications, extensions, etc

• Identifying emerging threats and vulnerabilities - short-medium term

• Exploring plausible risk, issues and threats thorough forecasting, scenario planning

• Developing capabilities and structures for “managing” reputation

• Policy review – does policy support operations?

• Social media policy

• Employee behaviour

• Reviewing and up-dating pre-crisis plan

• Innovation strategy

• Networks and capabilities

• Business model - is it “fit for purpose”

• Strategic intent - vision and mission

• Positioning strategy

• Narrative development

• Archetypes and message delivery

• Training and development of staff

• Exploiting intangibles for growth and distinctive differences

The Role of Strategic Anticipation in Reputation Management

Global security issues and geo-economics are a harsh reality, and events outside of the control of businesses and individuals, whether it is sanctions, terrorism, failed states, foreign policy or energy security, mean that any business can find itself isolated and seriously impacted at short notice. The barbaric events in Tunisia in July 2015, in which 38 people were murdered by Islamic terrorists and other similar events, are sadly not new, but with the rise of IS and extremism across the globe, what impact will this have on tourism, airlines, and suppliers?

Will it come to the horrible realisations that tourists, either as individuals or within tour groups, may never be safe again, and what impact would this have on tourism in general, as well as insurance and security? Of course, one cannot predict events, but one can evaluate trends and make plausible assumptions about what might happen.

The pressure of security challenges and the disruptions that they can cause to commerce and trade, requires all businesses, not just multinationals, to take a responsible look at how global and domestic events may impact their operations, either negatively or positively. Strategic anticipation is not new to business, but in our view, companies are deficient in their capabilities to properly scan the horizon or they outsource the responsibility to third parties, both of which can be poor substitutes to the organisations themselves having their own finely-tuned radar. Yes there are excellent organisations that will scan the horizons based on an understanding of your industry – but therein lays the weakness. No one better understands an organisation’s threats and vulnerabilities than the business itself. It is imperative that SMEs and multinationals alike develop reputational capabilities that include:

• Risk/issue analysis and environmental scanning for signals

• Monitoring of global geopolitical events and how they impact directly or indirectly on their operations

• Futures techniques that can help in situational awareness and generate options and choices that keep the organisation strategically agile and responsive

The use of basic futures techniques, such as forecasting, scenario planning, and horizon scanning is very relevant and useful to root-based reputation analysis. Future outcomes are influenced partly by our choices and actions in the present as the decision we take on a daily basis becomes manifest in the future. Logically, no one can predict the future, but we can recognise uncertainty and prepare for it. Futures techniques are useful to reputation management as they represent the only real way in which options and choices can be considered, thereby keeping the brand or organisation alert to possibilities.

Of all the basic futures techniques, forecasting is most commonly used and understood. In terms of reputation management, one usually refers to qualitative business forecasting, which involves the simple notion that the near future is a variation of today and is, in effect, an extrapolation of data. In terms of the uncertainty spectrum, forecasting is at the lower end i.e., limited uncertainty, and represents reliability, not accuracy. Without forecasting of some form, businesses can only operate through trial and error, which could be very costly and damaging. The real benefit of forecasting is that by reacting to it, one is invalidating it, so its real purpose in most instances is to drive outcomes and actions to prevent a forecast from becoming a reality, assuming it is negative.

As a form of strategic thinking, foresight is about generating options. Forecasting also helps with situational awareness and allows discontinuities to be spotted earlier. It is fair to state that innovation is as important, if not more important than reputation; one can have a great reputation, but if you fail to innovate, you become a victim of the cruel winds of creative

destruction. Just take Blackberry – a perfectly reputable firm and brand, it just failed to innovate against Apple’s and Samsung’s smartphones. Therefore, understanding the importance of innovation, it is also vital to spot possible discontinuities, which are sudden changes typified by technological disruptions or changes in sentiment, regulations and legislation.

Strategic thinking leads to strategic development, which finally leads to some form of planning. Despite the criticism of strategic planning, all organisations must make some form of plan, it is just not considered rigidly; forecasting provides options, planning involves actionning of the preferred option. But forecasting has its limitations as does the linear extrapolation of current trends.

Scenario planning is more towards the middle of the uncertainty spectrum and involves generating a view of the world, described in a narrative, which provides context and generates options. At the far end of the spectrum of uncertainty is horizon scanning.

Historically, Shell has become one of the most competent and frequent users of scenarios for business development, emphasising plausibility rather than probability. Big companies, such as Unilever and British Airways, regularly use scenarios for generating options and considering what might happen and how they could respond or adapt to various possibilities. But as a futures technique, scenario planning should be seriously considered by SMEs, not just large or multinational companies. Policy initiatives and decisions should be future proofed on an international scale to reflect the impact of globalisation and inter-connectedness within systems.

Horizon scanning is not well defined, but seems to analyse emerging issues and explore what is possibly ahead, across and around the usual sources of data and information/knowledge that are available. Horizon scanning is typically employed by governments to explore development at the margins of current thinking and planning.

Conclusion

Most commentators on reputation management tend to discuss the concept too narrowly, ignoring the vital behaviours and “root” branch elements that must also be paid attention to lessen damage. Organisations have well-developed capabilities for detecting online threats, and have in place risk and business continuity plans, as pre-crisis analysis. The emphasis is on effectively monitoring and reacting to events, rather than pro-actively managing and mitigating exposure to possible reputational damage and the devastating consequences this can bring.

As well as developing further the root capabilities, reputation managers must cast their net wide and embrace futures techniques to address a range of plausible possibilities and options. Starting with forecasting (qualitative techniques), reputation managers should also become familiar with drivers analysis, scenario planning and horizon scanning. Futures techniques as forms of strategic anticipation are not just for big business, they are now useful and relevant to SMEs. The rise of global risks and rapidly emerging geopolitical events cannot just be ignored. One cannot afford to be merely a spectator of complex risks such as possibilities of pandemics, the impact of climate change, terrorism, sanctions, wars, and the waves of disruption such events can have on business operations and services.

London School of Public Relations (LSPR)

LSPR is in the business of corporate communications training. We deliver training in areas such as Public Relations, Reputation Management, Media Management, Brand Management, Crisis Management, Corporate Social Responsibility (CSR), Risk & Issue Management, Writing Skills and Influence & Impression Management. If your business involves communications, PR, reputation management and branding, then we can add real value to your brand.

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